FUNDAMENTALS OF ACCOUNTING STUDY NOTES

SYLLABUS - 2016

2 FOUNDATION : PAPER -

FUNDAMENTALS OF ACCOUNTING

STUDY NOTES

FOUNDATION

The Institute of Cost Accountants of India CMA Bhawan, 12, Sudder Street, Kolkata - 700 016

First Edition : August 2016 Reprint : April 2017 Reprint : January 2018

Published by : Directorate of Studies The Institute of Cost Accountants of India (ICAI) CMA Bhawan, 12, Sudder Street, Kolkata - 700 016 icmai.in

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Copyright of these Study Notes is reserved by the Institute of Cost Accountants of India and prior permission from the Institute is necessary

for reproduction of the whole or any part thereof.

Syllabus - 2016

PAPER 2: FUNDAMENTALS OF ACCOUNTING (FOA) Syllabus Structure

A Fundamentals of Financial Accounting

80%

B Fundamentals of Cost Accounting

20%

B 20%

A 80%

ASSESSMENT STRATEGY There will be written examination paper of three hours

OBJECTIVES To gain comprehensive understanding of all aspects relating to financial statements, principles, procedures of accounting and their application to different practical situations Learning Aims The syllabus aims to test the student's ability to: Understand and explain the conceptual framework of Accounting Prepare Accounting for various entities under different situations Acquire basic concepts of Coat & Management Accounting relevant for managerial decision

making

Skill set required Level A: Requiring the skill levels of knowledge, comprehension,

Section A : Fundamentals of Financial Accounting

1. Accounting Fundamentals

35%

2.Accounting for Special Transactions

20%

3.Preparation of Final Accounts

25%

Section B: Fundamentals of Cost Accounting

4. Fundamentals of Cost Accounting

20%

SECTION A : Fundamentals of Financial Accounting [80 MARKS]

1. Accounting Basics 2. Accounting for Special Transactions 3. Preparation of Final Accounts

SECTION B: Fundamentals of Cost & Management Accounting [20 MARKS] 4. Fundamentals of Cost Accounting Section A : Fundamentals of Financial Accounting [80 marks]

1. Accounting Process (a) Accounting Principles, Concepts and Conventions (b) Capital and Revenue transactions - capital and revenue expenditures, capital and revenue receipts (c) Double entry system, Books of prime entry, Subsidiary Books, Cash Book (d) Journal, Ledger, Trial Balance (e) Depreciation - Methods (Straight Line and Diminishing Balance methods only) (f) Rectication of Errors (g) Opening entries, Transfer entries, Adjustment entries, Closing entries (h) Bank Reconciliation Statements

2. Accounting for Special Transactions (a) Bills of Exchange (excluding accommodation bill, insolvency) (b) Consignment (cost price, invoice price, commission & valuation of stock) (c) Joint Venture

3. Preparation of Final Accounts (a) Of a Prot making concern (for sole proprietorship concern only) (i) Accounting treatment of bad debts, reserve for bad and doubtful debts, provision for discount on debtors and provision for discount on creditors. (ii) Preparation of Trading Account, Prot & Loss Account and Balance Sheet. (b) Of a Not-for- Prot making concern (i) Preparation of Receipts and Payments Account (ii) Preparation of Income and Expenditure Account

SECTION B: Fundamentals of Cost Accounting [20 MARKS]

4. Fundamentals of Cost Accounting

(a) Meaning, Denition, Signicance of Cost Accounting, its relationship with Financial Accounting & Management Accounting.

(b) Classication of Costs (c) Format of Cost Sheet

Contents

SECTION - A: FUNDAMENTALS OF FINANCIAL ACCOUNTING

Study Note 1 : Accounting Basics

1.1

Accounting Principles, Concepts and Conventions

1

1.2

Capital and Revenue transactions - capital and revenue expenditures, capital and

revenue receipts

15

1.3

Double entry system, Books of prime entry, Subsidiary Books, Cash Book, Journal,

Ledger, Trial Balance

24

1.4

Depreciation - Methods (Straight Line and Diminishing Balance methods)

74

1.5

Rectication of Errors

87

1.6

Opening entries, Transfer entries, Adjustment entries, Closing entries

104

1.7

Bank Reconciliation Statements

117

Study Note 2 :Accounting for Specoal Transactions

2.1

Bills of Exchange (excluding accommodation bill, insolvency)

129

2.2

Consignment (cost price, invoice price, commission & valuation of stock)

142

2.3

Joint Venture

158

Study Note 3 : Preparation of Final Accounts

3.1

Prot making concern (for sole proprietorship concern only)

176

3.2

Not-for- Prot making concern

198

SECTION - B: FUNDAMENTALS OF COST ACCOUNTING

Study Note 4 : Fundamrntals of Cost Accounting

4.1

Meaning, Denition, Signicance of Cost Accounting, its relationship with Financial

Accounting & Management Accounting

215

4.2

Classication of Costs

227

4.3

Format of Cost Sheet

240

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